Kraft Foods, Cadbury agree $18.9 bln deal

FILE - In this file photo Friday, Nov. 20, 2009 chocolate moves down the production line at the Cadburys factory in Birmingham, England. Kraft Foods Inc. says Tuesday Jan. 19, 2010 the board of Cadbury PLC has accepted and recommended to shareholders an improved takeover offer worth $US18.9 billion. Kraft said in a statement Tuesday that Cadbury's board had unanimously endorsed the offer worth 840 pence per share, somewhat less than some analysts believe the British chocolate company is worth. (AP Photo/Simon Dawson, File)
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FILE - In this file photo Friday, Nov. 20, 2009 chocolate moves down the production line at the Cadburys factory in Birmingham, England. Kraft Foods Inc. says Tuesday Jan. 19, 2010 the board of Cadbury PLC has accepted and recommended to shareholders an improved takeover offer worth $US18.9 billion. Kraft said in a statement Tuesday that Cadbury's board had unanimously endorsed the offer worth 840 pence per share, somewhat less than some analysts believe the British chocolate company is worth. (AP Photo/Simon Dawson, File)
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FILE - In this file photo of Wednesday, Feb. 25, 2009 a Cadbury chocolate bar is seen for sale in a shop in London. Kraft Foods Inc. says Tuesday Jan. 19, 2010 the board of Cadbury PLC has accepted and recommended to shareholders an improved takeover offer worth $US18.9 billion. Kraft said in a statement Tuesday that Cadbury's board had unanimously endorsed the offer worth 840 pence per share, somewhat less than some analysts believe the British chocolate company is worth. (AP Photo/Kirsty Wigglesworth)— AP

FILE - In this file photo of Wednesday, Feb. 25, 2009 a Cadbury chocolate bar is seen for sale in a shop in London. Kraft Foods Inc. says Tuesday Jan. 19, 2010 the board of Cadbury PLC has accepted and recommended to shareholders an improved takeover offer worth $US18.9 billion. Kraft said in a statement Tuesday that Cadbury's board had unanimously endorsed the offer worth 840 pence per share, somewhat less than some analysts believe the British chocolate company is worth. (AP Photo/Kirsty Wigglesworth)
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Cadbury Chairman Roger Carr, who had led a spirited defense against Kraft's previous offer, said he believed the deal "represents good value for Cadbury shareholders."

Kraft still has to persuade a majority of Cadbury shareholders to accept the deal, and the door remains open until Saturday for The Hershey Co. to jump in with a rival bid.

Cadbury shares were up 3.3 percent at 834 pence following the announcement.

Kraft predicted pretax cost savings of at least $675 million a year once the combination has been working for three years.

Tuesday was the deadline for Kraft to raise its offer. Cadbury shares moved above 800 pence on Monday, indicating the market was looking for Kraft to jump to that level or higher.

The British company had fought hard against Kraft's initial offer announced in December, rejecting it as a "derisory" bid from an unfocused, underperforming conglomerate.

The agreed price is 13 times Cadbury's earnings before interest, taxes, depreciation and amortization; Cadbury had argued that similar recent takeovers in the sector had been for 14 times EBITDA or more.

Kraft may still have a battle winning endorsement from Cadbury shareholders, and The Hershey Co. has until Saturday to decide whether it wants to make a rival bid.

Feb. 2 is the deadline for Kraft to win acceptance from holders of a majority of Cadbury shares.

David Cumming, head of U.K. equities at Cadbury shareholder Standard Life, had said Monday that Kraft needed to aim above 900 pence to secure support from long-term shareholders. But on Tuesday, he signaled the fight was over. "I probably won't go against the view of Cadbury's management," he told the BBC.

Kraft, based in Northfield, Illinois, had raised the cash portion of its offer earlier this month after selling its North America pizza business to Nestle for $3.7 billion.

The report of a deal drew a sharp response from Felicity Loudon, a great granddaughter of Cadbury's founder Egbert Cadbury.